Cuba Tries to Skirt Recession


Cubans hope to sidestep what falls from above and abroad. photo: Caridad

HAVANA TIMES, April 13 (IPS) – The impact of the world recession threatens Cuba with new economic problems hitting its main exports and reducing its possibilities for external financing, though the nation’s authorities seem confident that crisis can be avoided.

Experts consulted by IPS see it foreseeable that, starting this month or next, the tourist flow toward the island could begin to diminish, which is significant in that last year the vital leisure industry brought in more than 2.5 billion dollars in foreign currency. Specialists also envisage a decrease in remittances from abroad.

In addition, the specialists noted that the international crisis has made obtaining credit from international banking institutions more expensive or restricted. The impact of this, which even Cuba cannot avoid, can result in a reduction in imports of raw materials for the island’s industries.

The collapse of the price of nickel, Cuba’s principal export commodity, meant revenues last year of about $250 million below what was foreseen. Likewise, the sale of choice Cuban cigars was also down by three percent, due to the global recession and the expansion of the international anti-smoking campaigns.

Austerity Measures in Place

Cuba continues to rebuild from the three powerful hurricanes that hit in 2008. photo: Elio Delgado
Cuba continues to rebuild from the three powerful hurricanes that hit in 2008. photo: Elio Delgado

Notwithstanding official discretion on the issue, it is known that Raul Castro’s government began taking measures to mitigate the impact of the world crisis. Steps included a six percent reduction in government expenditures and subsidies, which were approved for the present year for most Cuban institutions.

Desired or not, the reduction will diminish those resources available for social programs and development. However, some specialists on the matter estimate that the characteristics of the centralized Cuban economy and the prevalence of state ownership will allow the government “to maneuver and to intelligently use resources that are spread across other areas.”

“The fact that Cuba has a different economic structure gives it the possibility of using its limited resources with more precision. This is very important in a crisis whose direction no one can predict,” commented Ariel Terrero, the main commentator on economic issues for the island’s state television, in an interview with the Spanish website “Kaos en la Red.”

For the time being, the Economic Commission for Latin America and the Caribbean (ECLAC) is excluding Cuba from those countries in the region experiencing setbacks in growth this year due to the crisis. According to its executive director, Alicia Bárcena, the most affected nations are Mexico, whose GDP declined two percent; Brazil (-1.0 percent), Costa Rica (-0.5 percent), and Paraguay (less than -0.5 percent).

Music is one of Cuba’s biggest tourism draws. photo: Caridad
Music is one of Cuba’s biggest tourism draws. photo: Caridad

During a recent international meeting in Bogota, Bárcena added that Panama, Peru, Cuba and Bolivia are expected to maintain growth rates of three percent or better, while Ecuador and Chile will likely experience no increases in their GDPs in 2009.

The ECLAC official maintained that the crisis could become an opportunity to think about a new role of government, one of actively participating in the protection of the most vulnerable sectors of society and of promoting a more knowledge-based productive fabric.

Over the last few weeks, Cuban authorities have renewed their warnings about the critical state of the international economy and have urged preparedness to confront its consequences. However, they made it clear that the impact would not be as sharp as that suffered in the 1990s, which was due to the collapse of its main external trade partners: the Soviet Union and the European socialist bloc.

Effort to Reduce Food Imports Crucial

Cuban First Vice-president José Ramón Machado Ventura insisted recently before rank-and-file members of the ruling Communist Party of Cuba (PCC) in the eastern province of Granma, that to mitigate the crisis it would be necessary to increase agricultural production in order to substitute imports and increase exports.

Possibly the nation’s top priority is producing more food products to substitute costly imports. Photo: Elio Delgado

One of the Achilles heels of the island’s economy is its excessive foreign purchases of food, for which the country last year paid about US $2.5 billion-$907 million more than in 2007. That increase was caused essentially by the hike in prices for those products on the world market.

Due to the financial crisis that originated in the United States, at the end of December President Castro painted a panorama of uncertainty for this year. He also signaled that austerity measures would be taken because of the damage caused by three hurricanes that pummeled the island in 2008 and cost the economy almost $10 billion dollars, according to official estimates.

Faced with that national and international context, researchers project that the impact on the economy over the short term will be moderated by the easing of restrictions on remittances and trips to Cuba by Cuban-Americans.

Regulations approved in March in the US Congress will increase the frequency that those emigrants can visit their country of origin from once every three years to once annually. At the same time, these new rulings have authorized maximum daily spending by these visitors at $179 dollars, instead of only $50 authorized under the previous George W. Bush administration.

The effect would have been greater had the travel restrictions currently in place against the rest of American citizens had been lifted, a possibility about which Cuban officials in the tourist sector prefer not to comment on-at least not openly. With a hotel capacity of more than 46,000 rooms, Cuba received 2,350,000 tourists in 2008.

Translation by Havana Times